NVIDIA (NASDAQ:NVDA) is the dominant player in the discrete graphics processing unit (GPU) space with its market share estimated at almost 71%. The second-place player in this segment, Advanced Micro Devices (NASDAQ:AMD) lags NVIDIA by a huge margin as it commanded just 29% of the discrete GPU market in the third quarter, according to Jon Peddie Research.
However, a year ago, NVIDIA's dominance in the discrete GPU market was even greater. It had a market share of just over 81%, while AMD was languishing in the high teens. So, AMD has gained ground in the past year. What's more, AMD's upcoming product aimed at gamers could prove to be another threat to NVIDIA's bread-and-butter business as the gaming segment is 62% of its overall revenue .
AMD's next catalyst
AMD is set to come out next year with its new set of GPUs based on the Vega 10 architecture to target the high-end gaming market. The new architecture will be based on a more fine-tuned 14-nm FinFET technology as compared to the existing Polaris platform.
The advantage of the 14-nm FinFET platform is that it will allow AMD to increase the operating speed of the GPUs and reduce power consumption simultaneously. As a result, AMD's new cards will deliver a better performance per watt as compared to the existing architecture. But, more importantly, the new Vega series cards could help AMD steal a march over NVIDIA's latest generation of GPUs.
Can Vega blow NVIDIA away?
AMD's Vega 10 GPU will be equipped with second-generation high-bandwidth memory, or HBM2. The deployment of the HBM2 should ideally help AMD's high-performance RAM to clock a higher bandwidth and consume less power at the same time as compared to NVIDIA's cards.
In fact, it is estimated that the Vega 10 GPU will offer bandwidth of up to 1,024 gigabytes per second, which is much higher than the 320 gigabytes per second delivered by NVIDIA's GTX 1080 card. Thus, AMD's latest-generation GPUs are expected to exceed the bandwidth of NVIDIA's flagship GPU by a really big margin, allowing the card to deliver a better VRAM performance.
This number is important to the gaming community since a higher GPU bandwidth will render higher-quality images more quickly and efficiently as compared to lower bandwidths. This is where AMD will get a leg up on NVIDIA among gamers as its GPU will allow users to tap the potential of graphic-intensive games in a better way due to improved tech specs.
Another area where the Vega will trump NVIDIA's GTX 1080 is in terms of teraflops. The higher the number of teraflops in a GPU, the more the computing power . As a result, the presence of more teraflops in a system will enable the creation of a more complex gaming universe that will be richer in detail and experience.
In fact, the Vega GPU is expected to clock 12 teraflops of performance as compared to the GTX 1080's 10.8 teraflops. Thus, AMD's next-generation GPU could blow away NVIDIA in terms of performance, and if priced right, it could continue to take market share away from the leader.
The launch of the Vega might prove to be a masterstroke for AMD as it has upgraded its GPU architecture in less than a year from the Polaris, which was launched in June this year. By accelerating its product road map, AMD will have the latest offering as compared to NVIDIA's Pascal architecture, which was launched in the second quarter this year.
In order to counter the Vega threat, it is rumored that NVIDIA will bring forward the launch of its Volta architecture by a year . As fellow Fool Ashraf Eassa points out, the Volta architecture will provide a significant performance bump over the current generation Pascal architecture.
It wouldn't be surprising if NVIDIA does bring forward its own product road map by a year since the Volta GPUs will also reportedly be based on the current 16-nm process. However, the tech specs related to NVIDIA Volta are still not out in the open, so performance comparisons are not possible.
It looks like the battle of GPUs will get more intense next year. AMD seems well-prepared to tap the high-end gaming segment with its latest architecture, and this is one threat that NVIDIA investors should not ignore.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.